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Understand The Requirements for Your Personal Financial Plan

Your Personal Financial Plan (PFP) is a document that contains all critical areas of your personal financial life. It is your individual and personal roadmap for achieving your personal and family goals. It is a critical part of President Benson’s admonition to “plan your financial future early, then live your plan.” It requires you to think through what you want, determine where you are now, set goals for where you want to be, develop a plan, implement and revise the plan as needed.

There is a six-step process in putting together your Personal Financial Plan.

Step 1: Decide What You Want

Deciding what you want is establishing what is important to you. It is your core values and beliefs. Think through the things that you need to decide. What is truly important to you? What do you feel Heavenly Father wants you to do or be? How would you like to be remembered when you leave this life? What do you want to accomplish with your life? These are probably the most important questions you will ever ask and answer.

Step 2: Evaluate Your Financial Health

Evaluating your financial health is determining where you are financially. When I graduated from college, I was scared to balance my checkbook because I thought I would find out how bad of shape I was in financially. But it is a critical part of your financial plan.

Evaluate your financial health. Develop a balance sheet, income statement, budget and calculate your financial ratios. Determine where you are now financially. Understand that if you don’t know where you are, how can you determine how to get where you need to be?

It is critical that you understand your current situation in regards to income, spending, and wealth. Are you financially healthy? Are you solvent? How much debt do you have? How much are you saving each month and year?

Step 3: Define your Personal and Financial Goals

Once you know what is important to you, and you know where you are financially, it is critical to define your personal goals. You will achieve what you set your mind to, you will hit what you aim for, you will accomplish those goals that are important to you.

Write your goals down. Attach a cost to each goal. Remember that there are more costs than just financial costs. What are the true costs to your goals, in terms of time, money, and effort?

It is also important to determine potential obstacles. By identifying the obstacles early in the analysis, you increase your ability to avoid and overcome those obstacles.

Set a date for when your goals are to be completed. When can the goal can be reasonably accomplished? Make your goals SMART: Specific, measurable, achievable, reportable, and time-bound. Then share them with others.

Step 4: Develop a Plan of Action

Know what you should work on and when. Your plan should be the following:
Flexible—It should be able to change as your situation in life changes.
Liquid—It should have the ability to convert non-cash assets into cash with relative ease.
Protective—It should be able to meet the unexpected large expenses without difficulty.
Tax efficient—It should pay Uncle Sam all that is owed and no more.

Think longer-term, and consider future needs. Develop a spending plan or budget and use it wisely. Plan for big-ticket purchases, such as for houses and cars. Plan for managing debt and remember that debt is the enemy to growth. Plan for insurance and protect yourself. Determine your Investment Plan and investment strategies and follow that plan. Plan for the expenses of children, missions, and college. Plan for retirement and your later years. Most import, plan your financial future, then live your plan.

Step 5: Implement Your Plan

Once you have your Plan, implement it. Use common sense and moderation in the things that you do. Set wise goals and work toward them each day.
Use wisdom in your plan, and stay positive. Remember that your Plan is a goal to set your sights by, not a stick to beat yourself with. Realize that detours will come, but stay on track after the detours. Detours come to all of us, and good things come to those who hang in there!

Step 6: Revise Your Plan as Necessary

Revision is an important part of your Plan. Remember that people and goals change, and you need to account for this. Periodically review your progress, and fine tune your Plan as necessary. Make sure that your plan still matches your goals, and review your goals annually at a minimum. Remember your plan is etched in paper, not in stone.

Much of this Plan is personal and challenging as you try to understand yourself and your family and the things you want to accomplish. The purpose of this manual and this Web Site is to help you in identifying critical areas and making important decisions. In this series and this class, we will work on Steps 1- 4:

Step 1: Decide what you want out of life.
Step 2: Evaluate your financial health.
Step 3: Define your personal and financial goals.
Step 4: Develop a plan of action and start living your plan today.

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